Vantage Will Pay $4.5M to Settle Mail-Fraud Charge

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The Vantage Group, its CEO, then-CFO and two subsidiaries agreed last week to pay $4.5 million to settle a 5-year-old civil suit filed by the U.S. Attorney's Office in Massachusetts.


The lawsuit alleged that during the 1990s, Vantage, a for-profit company that conducts fundraising for nonprofit organizations; CEO Henry R. Lewis; and then-CFO Harry S. Melikian made false statements to cover up their improper use of the nonprofit rate.


The suit charged that while conducting fundraising programs for nonprofits, Vantage improperly mailed about 78 million of pieces of mail at the reduced nonprofit rate.


Vantage, Brookline, MA, knew it was not entitled to use the rate, according to the suit, because the mailings violated the Cooperative Mail Rule, which states that a mailer can't mail on behalf of another party using the nonprofit privileges of that party.


Under a U.S. Postal Service rule change beginning Nov. 13, nonprofits will be able to use for-profit fundraisers yet still receive the nonprofit rate. Previously, if a for-profit company entered into a joint venture with a nonprofit group, the mail would be ineligible for the nonprofit rate.


"Vantage believes now, as it always has, that we were in compliance with all U.S. Postal Service regulations," Melikian, now Vantage's executive vice president, said in a statement. "We note with pleasure that the regulations at issue in this matter have recently been amended by the U.S. Postal Service and now reflect the position taken by Vantage throughout the proceedings."


The complaint said that in 1990 the U.S. Postal Inspection Service investigated Vantage regarding illegal cooperative mailings. As a result of the investigation, Vantage and one of its nonprofit clients paid a postage deficiency to the government based on illegal cooperative mailings.


Vantage then revised its contract to make clear that in the future it would not have a financial stake in programs it conducted on behalf of its nonprofit clients. The USPS then permitted Vantage to mail at the nonprofit rate on behalf of its nonprofit clients.


The complaint, however, said that starting in the early 1990s, Vantage, unbeknownst to the USPS, amended its contract by entering into secret "side letters" with many of its nonprofit clients. Under the side letters, Vantage agreed to take a financial stake and share in the costs and benefits of the mailings. Here, the company improperly caused tens of millions of pieces of mail to be sent at the nonprofit rate, saving the company millions of dollars in postage.


None of the nonprofits involved in the suit were named.


About $990,000 of the settlement will be paid to Lawrence Saklad, a former Vantage salesman, who alerted the government of the misconduct by filing suit under the provisions of the False Claims Act. In appropriate circumstances, the False Claims Act provides that whistleblowers can share 15 percent to 25 percent of the government's recoveries.


As part of the settlement, Vantage agrees to dismiss the third-party claims it brought against many of its nonprofit clients.


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